What Does Being a Millionaire Really Mean?

[brookiel]

Hi

Yeah I used to think $1,000,000 was like winning the lottery when I was a kid, and now I have paid off my mortgage and have that money in my house - well it's like WOW I am a millionaire - so to speak.

[Sam]

brookiel, are you the author of "Retire To Asia"?

If not, have you read it? What do you think of it?

[Elspeth]

Quote:

Originally Posted by kcowan And then their is this: In Silicon Valley, Millionaires Who Don’t Feel Rich - New York Times

Well, Silicon Valley is a bit atypical, with the idiotic house prices. If you're having to pay a mortgage on a $1.5M 50-year-old 1500-sqft 3-bedroom house, it doesn't leave much scope for saving. At least the energy costs tend to be low there, which will be a bigger consideration in the future with energy prices continuing to increase.

Silicon Valley is full of millionaires who are millionaires simply by virtue of having owned a home for a few years, considering the inflation in house prices there since the mid-1970s. But in real life it doesn't make any difference to anything unless you sell your house there and move to somewhere cheaper.

[kcowan]

Quote:

Originally Posted by Elspeth ... But in real life it doesn't make any difference to anything unless you sell your house there and move to somewhere cheaper.

The article was featuring people with several million in assets in addition to their houses. What you describe might apply to many people on both coasts. As long as they are prepared to give up/rebuild their current lifestyle.

[FinanceGeek]

To echo what Elspeth said, it is quite clear that most anybody who's owned a house on either coast for at least the last 5-10 years probably has developed a substantial net worth, at least on paper.

But as you said it means very little unless they relocate away from those areas...

As for your example of a "$1.5M 50-year-old 1500-sqft 3-bedroom house", I try hard to keep separate the difference between price and value, hence I do not live in such areas !!!

[Eyerishgold]

I'm guessing being a millionaire means having a net worth that looks like this $1,000,000.

Using net worth is probably the truest definition of the term millionaire. However, I'm sure most people consider being a millionaire means having $1mm in investable assets.

[ScottFromUtah]

Quote:

Originally Posted by Eyerishgold I'm guessing being a millionaire means having a net worth that looks like this $1,000,000. Using net worth is probably the truest definition of the term millionaire. However, I'm sure most people consider being a millionaire means having $1mm in investable assets.

Do you remember the old (terrible!) Fox game show called "Who Wants to Marry a Multimilionaire?" All the cute women lined up to try to be the winner, because they loved the idea of marrying rich. Turned out the guy was a homebuilder/contracter (as I recall), who had 2-3 million in assets, but most of those assets were his company. He had few liquid assets and low cash flow.

So yes, he was indeed a multimillioniare (in about the same sense that I am), but he didn't have the look and feel of a multimillionaire (and neither do I).

[packrat44]

It is my opinion "millionaire" has little meaning. In 50 years someone with $1M might be at the poverty level.

The goal should be FI, not $1M ($2M; $5M; (?M). The level of money needed to be FI has a wide range. A person who has worked all his/her life at minimum wages probably has a much lower requirement than an attorney, surgeon, etc. I imagine Paris Hilton could only survive a few months if she had "only $1M" (and had to pay her entire way) at her level of consumption.

LBYM; determine your real "needs" (not "wants"); then a person can project what it will take to be FI. Better add a little extra because it is the "wants" that make life fun.

[semtex]

For us, 1M means barebone ER. Working one it...

[unclemick]

I'm one of them ballpark 3 times millionaires.

Paid off 21k fish camp/beater vehicle in the LA swamp with 300k in 1993. Millionaire circa 1999, not, again after 2002, Katrina 2005, not, again around 2006. I hope the third times a charm.

I was 'rich' living large in New Orleans' eastern swamp - now I'm just so so in greater Kansas City burbs.

heh heh heh heh heh heh heh - Did find some really cool bib overalls at Salvation Army. Straw hat and a toothpick and perhaps I won't miss my Jimmy Buffett shirts in the closet.

[Spanky]

One definition is $1MM in financial assets. Since the term millionaire was coined in late 1800s to signify wealth, you need to have at least $25 million dollars to qualify as a millionaire.

[Retire Soon]

When considering one's net worth, it's wise to consider "phantom assets" as well. For example, if someone receives a cola'd pension of $40,000 a year, it would take $1,000,000 in savings to be equivalent to this amount of annual income with a safe withdrawal rate of 4%. Even with no other assets, this example would make someone a millionaire.

[Enuff2Eat]

i totally agree with RetireSoon. that's exactly how i feel. To me having a $40,000/yr pension truely is a millionaire. Many people in this forum have assets exceed ONE million dollar but they still pack their lunch and going to work the next day.... WHY??


because there net worth does NOT generate money for them, in some cases their net worth still taking money away from them. for ex. real taxes, maintenance, broker fee, insurance...

i personally know someone in this case. they have $650,000 paid off , their stocks, 401k... yet still does not feel the millionaire status.

enuff

[hayekcapitalist]

Or does the idea of millionaire matter any more? Maybe The Millionaire Next Door concept is already dated, and the next version of the book should be The 5-Millionaire Next Door--about ordinary people who have assets of $5 million. Whaddayathinque?[/quote]

Prof. Stanley, one author of The Millionaire Next Door, the other being Prof. Danko, carried the research begun in same book forward in The Millionaire Mind, where he studied deca-millionaires. The second book supported a conclusion similar to Next Door: the deca-millionaires are not inherited, LBTM, recognized value in their purchases, etc.

What cost $1000000 in 1955 would cost $7243671.97 in 2006.
Also, if you were to buy exactly the same products in 2006 and 1955,
they would cost you $1000000 and $138051.53 respectively.
The various and sundry computations invoving nominal 2006 dollars v. constant 1955 dollars, as one observer already opined, involve adjusting the $1,000,000 in 1955 dollars forward 51 annual periods (end of year assumption rther than "annuity due" at beginning of year) to future 2007 dollars (actually in the present) of $7,243,671.91. Using a financial calculator, or lots of guess, check, and revise using the exponential functions of a scientific calculator, and solving for the i (the implied interest rate) or in this case the inflation rate indicaters that an inflation rate of 3.959% per year compounded was assumed, not an unreasonable simplifying assumption. "Going the other way," deflating 2006 purchasing power to 1955 purchasing power, $1,000,000 and $138,051.53, equates to an implied average annual compounded inflation also of 3.959%.

No, $1 mil ain't what it used to be, but it sure ain't chopped liver, and it beats having $0.00, or worse, insolvency anyone?

So how do I spell millionaire: net worth is o.k if you don't need to live in a house and can sell it in a hurry at a price certain with very little frictional transactional costs (aka "vigorish"); or furnish an abode; will or can sell your jewelry and collectibles to raise cash in an emergency; can sell car and walk, etc.

Therefore, for me, and IMO it has always been about having $1,000,000 invested in marketable securites. Marketable, for me, means trading in an active market, at transparent prices, where buying or selling my tiny amounts does not influence the price.

[W2R]

To me, you aren't a millionaire unless you normally have a million in the bank, stocks, and bonds.

I know, I know... you COULD count one's home and you COULD count a cola'd pension and you COULD count social security and you COULD count your car and you COULD count that toaster that you bought for $9.95 last year.

I just don't happen to think of it that way.

I also think being a millionaire means having a million dollars, not 25 million.

Not gonna argue, too old to change, and that's what being a millionaire means to me so I will agree to disagree.

Scrooge McDuck had a million dollars in the bank. I'm sure he did!

[hayekcapitalist]

I couldn't agree more with your definition of "millionaire." Some think it doesn't matter, and they may be right. They can define it any way they want, but, we all have the earned right to dream and through self-actualization turn those dreams into reality. i.e "a millionaire is one who can afford the luxury of debating whether one enters the club through the front door because she has $1 mill invested and/or liquid, or through the back door of the house on the left coast that six months ago was "worth" a million dollars and now has no determinable value because, if you believe the pundits, the credit markets have seized and buyers can't step up to the plate."

Oh....wait a minute, maybe it does matter? But, what if the U.S.D. dives, dragging everything including equities to perdition with it, and, then where would I hide, and I wouldn't be a millionaire anymore, perhaps gold is the place to be, no, the yellow metal doesn't appear to be the safe haven in troubled times it once was, or so "they" say.

One is rich who attempts, at least, to maintain perspective, along with dignity. And the perspective is this:

Most of our "fellow Americans" spirits are so poor and will so weak they can't fathom having 100 G's much less 1 million.

[DblDoc]

Quote:

Originally Posted by Retire Soon When considering one's net worth, it's wise to consider "phantom assets" as well. For example, if someone receives a cola'd pension of $40,000 a year, it would take $1,000,000 in savings to be equivalent to this amount of annual income with a safe withdrawal rate of 4%. Even with no other assets, this example would make someone a millionaire.

In "Four Pillars" Bernstein writes about how in other countries your "financial worth" is discussed in terms of annual income produced, regardless of its origin. This makes more sense then our "net worth" mind set for the many reasons discussed above.

[Milton]

Quote:

Originally Posted by Want2retire To me, you aren't a millionaire unless you normally have a million in the bank, stocks, and bonds. I know, I know... you COULD count one's home and you COULD count a cola'd pension and you COULD count social security and you COULD count your car and you COULD count that toaster that you bought for $9.95 last year. I just don't happen to think of it that way.

I agree.

[Milton]

Quote:

Originally Posted by kcowan And then there is this: In Silicon Valley, Millionaires Who Don’t Feel Rich - New York Times

Wow, that's some article. Thank you for sharing it.

[hayekcapitalist]

"Today, he has roughly $1.2 million left in savings and another several hundred thousand dollars’ worth of home equity, Mr. Barbagallo said, with one child in college and a second on her way.
So he works as hard as ever, logging more than 70 hours a week at a San Francisco start-up.
“Poor Tony, he’ll never be able to retire,” Catherine Barbagallo said."

I don't whether to laugh or cry. God bless 'em.